Our oversold indicator reached extreme level, that was not seen even during the 2008 financial crisis turmoil. Anyway, the underlying indicator is showing a little improvement as can be seen from the picture below. At this point, we are expecting the law of inertia to bring the condition for supply and demand to "balanced" level. Before we reach the level, Dax has two options: to consolidate or reach higher level. We are expecting the latter to happen.

Lower stock prices seemed to interest investors as the volume surged almost to the highest level during this bull market.

Previously I wrote that the volume index hasn't confirmed the lower prices yet, but eventually this happened.

Interestingly, McClellan Indicator fell to even lower level than during the bear market 2008-2009...

Since TRIN turned positive, we could believe that some buyers are awakening, and thus, bears are becoming weaker.

Volume-based cumulative accumulation/distribution based on stock volumes also peaked into positive territory, so this suggests rebound.

Dax oversold/overbought indicator calculates supply (green) and demand (red). The sellers have pushed the red line almost too high, so within a week we should see a rebound.

Quite quickly, there are 9 stocks that made 52-week lows last friday. As you may notice, previously this happened 28.1.2008, 23.7.2008 and during Lehmann collapse. Even during the capitulation and the lowest index level in March 2009 we didn't get as many 52-week lows.

During this week Dax has dropped more than -15% from previous week's high.

In history we have seen such drops mostly in bear markets, but there have been few cases also during bull market as you can see from a picture above.

I wanted to find out if bulls have had any edge following this kind of crazy weeks.

Statistically next week's have been looking like following for bulls:

1 week

2 week

3 week

4 week

median

-0,99 %

4,32 %

6,37 %

5,06 %

average

1,99 %

2,84 %

4,59 %

3,88 %

probability

47,62 %

61,90 %

76,19 %

61,90 %

max

16,12 %

18,50 %

22,12 %

21,40 %

min

-10,16 %

-12,05 %

-17,25 %

-22,12 %

The probability for rebound is not very promising even the averages and medians seem very high. If see any rebound, we should mostly expect it during the next 3 weeks. After 3 weeks, the bulls have lost the edge.

Next we want to know where the next week's high have been according to this week's close.

high

median

6,31 %

average

7,58 %

probability

95,24 %

max

18,47 %

min

-0,28 %

The same statistics for low compared to this week's close.

low

median

-4,67 %

average

-4,71 %

probability

85,71 %

max

2,38 %

min

-16,04 %

Statistics for possible lower low:

low

median

2,96 %

average

2,15 %

probability

38,10 %

max

16,95 %

min

-14,01 %

According to history, lower low has only 38,1% succeed rate. It shouldn't surprise to see strong rebound, but it looks like very volatile next week. I would buy speculative longs from these levels.

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